Montana Lawmakers Debate Tax Credits For Religious School Donations

The State Department of revenue heard over an hour of testimony today over its controversial proposed new rule. It says a new tax credit scholarship program cannot be used to benefit religious-affiliated schools.

The bill, passed into law this year, will allow tax credits for donations of up to $150 a year to scholarships to private schools or to innovative educational programs in public schools. The annual limit is $3 million.

Revenue Department officials claim that the state constitution bans any direct or indirect support for religious institutions, so it can’t include faith-based institutions in the program.

Sen. Llew Jones (R) SD9

Credit Montana Legislature

Republican Senator Llew jones of Conrad, who sponsored the bill, said the state officials were substituting their own judgement for that of the legislature.

“I believe when the Legislature passes a bill and the executive allows it to become law, if the bill says the sky is pink, then the rules need to reflect that the sky is pink, and if an aggrieved party disagrees with that then they need to use the judicial to stop it process midway and this sort of an argument bodes ill across all elected branches.”

Eric Feaver, with the MEA-MFT teacher’s union said just the opposite is true -- the sky really is blue, because Jones’ bill requires the scholarship program to comply with the state constitution.

“Given the rules that are dispute here I would argue that the department is doing exactly what it's supposed to be doing. It is writing rules pursuant to the bill itself which references the constitution that says everything about how indeed a scholarship organization could distribute its money, and it prohibits that scholarship organization from distributing its money to sectarian enterprise that would educate our children.”

Representatives of several religious groups, including the Montana Family Foundation and the Catholic Diocese of Helena, argued that their institutions would suffer if they did not receive the same benefit under the bill as non-religious private schools.

Erica Smith, from the Virginia-based “Institute for Justice” law firm, said if the rule is allowed to stand it might set a precedent that could call into question many existing Montana tax-credit programs.

Jeff Laszloffy of the Montana Family Foundation urges the Department of Revenue to allow tax credits for gifts to religious schools.

Credit Steve Jess

“Because these programs also allow donations to go to religious groups. These tax credit programs include the college contribution credit, the qualified endowment credit, the dependent care system credit, and the elderly care credit. According to the department's position that tax credits constitute public funds, these programs would also be unconstitutional.”

Others argued that the overall trend across the nation is to allow parents more, not less choice, in their childrens' education, and the revenue Department’s proposed rules would go against that trend.

Department officials listened to the testimony, but offered no comment and did not immediately rule on the matter.

Separately, state lawmakers are being polled to determine whether the Revenue Department’s rule is consistent with their intent when they passed the bill earlier this year. The result of that poll is non-binding, but it establishes a record of legislative intent that could be used in any lawsuit challenging the scholarship program. And that’s one thing that people from all sides seemed to agree upon at the hearing -- no matter the outcome of the rulemaking process, this rule is likely to face a court challenge sometime in the future.

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